Chinese Manipulating Their Currency
November 15, 2011
– Comments (24)
You've heard Mitt Romney say it. You've heard Barack Obama say it. You've probably even heard your neighbor say it. "The Chinese are cheating by artificially keeping their currency cheap."
It's a great argument. Cheap currency equals cheap products. Except it's wrong.
Not wrong as in cheap currency doesn't equal a cheaper product, but wrong that a country can manipulate their currency to their advantage. We can look at any product category, so I'll pick televisions. The Chinese want to get into our market and produce TV's. They weaken their currency and voila, TV's made in China are 10% cheaper than TV's made in Japan or Taiwan. OK, TV's is a bad product category because we don't make those, let's switch to furniture. So the Chinese weaken their currency to make sofa's and North Carolina suffers as jobs are lost to cheaper competition from Chinese manufacturers. The Chinese are not satisfied with 15% of the market, they want 50%, and more U.S. jobs are lost as the Chinese keep putting out lower cost products. Now the Chinese want to start making serious money on these sofa's, but they can't do that until they dominate the market, so they devalue their currency further and make it so weak that no one will buy an American made sofa. The Chinese people don't seem to mind that gasoline costs 1,500 yuan/gal, because they just want to sell Americans cheap sofa's. Those hard working Chinese just want to wake up, work 12 hours, get a spoonful of rice, then send their hard work to lazy Americans watching their Chinese made TV's, sitting on the Chinese made sofa's.
All's good in America until the Chinese say "We tricked you! For 30 years we've cornered your markets, now you have no sofa manufacturing and we're going to RAISE prices sky high! Ha, ha!!!"
Hayek and Mises are turning in their respective graves. The Chinese have figured out a way to BEAT a free market system! The Austrian school of economics looks doomed when the Mexicans ask - "Can we make sofa's and stuff for you?"
There also shocked when North Carolinians begin opening shuttered factories to begin making sofa's again.
The Chinese were clearly not expecting other people in the world are willing to be productive. "Damn it!" they say "who would have thought our 30 year plan of currency devaluation had a downside."
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So what's the point of this blog, other than to show you can't corner markets using cheap currency (remember the Japanese were going to make all electronics in the 1980's). The point is, if someone is stupid enough to give you a product for less than fair value, as a Capitalist you should take it. The joke is on them, not us. If so many U.S. citizens are out of work, who's going to buy Chinese stuff? If they make it so cheap that we can just print welfare checks to all Americans and the Chinese make everything for us, I say "Thank you China!" We got rid of slavery because it is wrong, but if they want to be our slaves out of CHOICE, is that morally wrong? I say not.
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